Expenditure is the full amount incurred by a business concern, whether paid or not, while the term “payment” refers to the amount actually paid.
Payments come in two types:
- Capital payments
- Revenue payments
Capital payments are the amounts actually paid on account of some capital expenditures.
Furniture is purchased from Wild Wood Furniture for $7,000. Initially, $4,000 in cash is paid and a promise is made to pay the balance within 5 months. In this case, $7,000 is a capital expenditure and $4,000 is a capital payment.
Revenue payments are the amounts actually paid on account of some revenue expenditures.
Merchandise worth $1,300 is purchased from John & Sons by paying $800 in cash and promising to pay the balance after 3 months. Here, $1,300 is classified as revenue expenditure and $800 is the revenue payment.